Fidelity Investments is moving beyond custody operations for digital assets with a new offering that lets clients on its digital assets custody platform pledge Bitcoin as collateral for cash loans.
The loans are provided by third-party lenders, and initially include only those from BlockFi, a cryptocurrency lending platform and CME Bitcoin Futures block liquidity provider. BlockFi can offer its institutional customers the option to custody the Bitcoin pledged as collateral for their cash loans on the Fidelity platform.
“We continue to see demand for increased capital efficiency from institutions that maintain long Bitcoin positions, and with this collateral agency capacity, our customers seeking that efficiency can access more opportunity with the capital that they trust us to keep safe,” Christine Sandler, head of sales and marketing for Fidelity Digital Assets, said in a statement. She noted that “institutional investors are looking for a more comprehensive offering in the digital assets space.”
These investors include hedge funds and corporate entities who are long Bitcoin as well as mining companies and merchants accustomed to keeping a significant amount of Bitcoin on their balance sheets while needing to pay operating expenses with cash, a Fidelity spokeswoman tells ThinkAdvisor. She said the new capabilities also have the potential to serve the over-the-counter derivatives market.
A Fidelity survey of nearly 800 institutional investors in the U.S. and Europe conducted by Greenwich Associates from November 2019 to early March 2020 found that 36% invested in digital assets and that U.S. investors who owned digital assets increased their share from 22% in 2019 to 27%.